Why is Microsoft giving away web traffic and abandoning users?

I am puzzled by Microsoft’s decision to close Live Spaces and send all its users to WordPress.com. Of course WordPress is a superior blogging platform; but Spaces made sense as an element within an integrated Live.com platform. According to Microsoft it has 7 million users and 30 million visitors; and if you accept that business on the web is all about traffic and monetizing traffic, then it strikes me as odd that Microsoft has no better idea of what to do with that traffic than to give it to someone else.

It makes me wonder what exactly Microsoft is trying to do with its Live.com web property. You can make a generous interpretation, as Peter Bright does, and say that the company is learning to focus and losing its “not invented here” religion. Or you can argue that it exposes the lack of a coherent strategy for Microsoft’s online services for consumers.

Part of the reason may be that blogging itself has changed. The original concept of an online diary or “web log” has fractured, with much of the trivia that might once have been blogged now being expressed on Facebook or Twitter. At the other end, blog engines like WordPress have evolved into capable content management systems. Many blogs are just convenient tools to author web sites.

Spaces is also a personal CMS. When combined with other features of Live.com, it provides a way of authoring your own web site, with photos, lists, documents, music and video, gadgets and other modules. You can apply themes, select layouts, and even add custom HTML. Everything integrates with the Windows Live identity system. The blog is just one element in this.

Now, although you can move your blog to WordPress.com, much of this is going away. Themes, gadgets, guestbook and lists are not transferred. If you were using Spaces for in effect a personal web site, you will have to start again on WordPress.

What this means is that WordPress, not Microsoft, now has the opportunity to show ads or market other services to these users.

Other services including SkyDrive, which is an excellent online storage platform, and Hotmail for email, are continuing as before. Still, the wider question is this. If Microsoft is happy to abandon 7 million users and all the customisation effort they have put into creating a personal online space, why should I trust it for email, or online storage?

Microsoft’s Dharmesh Mehta does his best to explain the decision here:

When we looked at Spaces, and what we had done with Spaces, and the more we thought about where do we want this to go, where do we think blogging evolves to, what’s important about that, you look at WordPress.com, and they’re building that. They’re doing a great job. And there really isn’t much value in us trying to compete with that.

This seems weak to me. Mehta is even less convincing when it comes to Live ID:

Windows Live ID is not really a means unto itself. There are times when it’s important for us to be able to associate an identity with someone. But there’s many things that we do where you don’t need a Windows Live ID — Photo Gallery, if you’re just using it on your PC, you don’t need a Windows Live ID at all. You can take our Mail app and connect it to Yahoo or Gmail or something like that. You don’t need a Windows Live ID. So I wouldn’t say that Windows Live ID is a goal, or something that we’re trying to drive in and of itself. It’s really more a means when we think it’s valuable for someone to have an account.

Now, I thought the Live ID was a single sign-on for Microsoft’s online services, and the basis of a network of friends and contacts. Perhaps Microsoft is now ceding that concept to Facebook or others? This does seem to be a move in that direction; and while it may be acceptance of something that was inevitable, it is a bad day for Microsoft’s efforts to matter online.

This is one of those times when you go, Why? Either someone is losing it in the online business or they have a plan. It is really hard to see that plan with a move like this. I thought Live ID was a goal in itself, and good one at that too. Alot of people wish to have one authority for signing in, a one stop shop for everything, mail, storage, IM, chat, documents, collaboration. Why remove one part? Will they remove the rest too?

I think they do this because they don’t want to compete with an open source platform, not because it is superiour per say but because open source have a tendancy to slowly but steadily drain, or at least shift, the money stream from the software vendor to the content/service provider, thus not a very interesting business to be in for a software vendor. There are still ways for Microsoft to sell you an ad service and make the same amount of money as before with less expenses.

Microsoft has had a culture of money-spending and money-making products since the dawn of days. They have a lot of stuff that they built with the notion that they wouldn’t make money out of it.

Maybe I’m being naive here, but Dharmesh’s comment make some sense. I really don’t see a business model that generates high revenue streams for Microsoft with Spaces… so they maybe decided to ditch that money-spender and focus their energy somewhere else.

The other place might be the merge of Bing and Yahoo search. There’s a huge potential there and merging the two creates a solid competitor to Google and a change to take a bigger slice of the multi-billion dollar ad spend. And I don’t think Microsoft needs Spaces to help with that move.

This is exactly what I thought when I heard about this. It’s a relief to see not-invented-here syndrome take a back-seat for once in Redmond, and maybe a realization that they don’t need to have a half-assed product in every product category. But on the other hand, what does this say about the overall direction (or lack of) for windows live? The only ‘strategic’ benefit I could see might be some kind of live -> wordpress -> wordpress on azure thing…but they said in their announcement that no money changed hands. Just weird.